Book Reviews

Book Reviews

"Free Trade In The New Millennium: Papers Presented At A Seminar Arranged By The New Zealand Institute Of International Affairs". Ed. Gary Hawke (Parliament House, 1 July 1999, published by the Ministry of Foreign Affairs & Trade)

- Dennis Small

For an official collection of papers which argue the case for free trade, you could not do much better than "Free Trade in the New Millennium". Its puffery is transparent. To be sure, it well shows that the proponents of free trade are indeed starting to run out of puff. Even before the failure to launch a new World Trade Organisation (WTO) round at Seattle, at the end of 1999, they were clearly getting a bit winded. And this was a National government-sponsored seminar aimed at mobilising support for the NZ position in the WTO negotiations, and promoting Mad Mike Moore to be the new WTO Director General.

When taken in conjunction with the book that I reviewed in Watchdog 93 (April 2000), i.e. "Whose Trade Organisation?" by Lori Wallach and Michelle Sforza (published by Public Citizen, US, 1999), this Ministry of Foreign Affairs & Trade (MFAT) booklet reveals the bankruptcy of the free trade position in aspect after aspect of the issues involved. Whereas Wallach and Sforza in their study systematically demonstrate the threats and destruction posed by corporate globalisation and its agents with a wealth of concise, graphic, specific examples, the Establishment pundits indulge largely in empty pieties about what neo-capitalist economics enjoins, and how the WTO, World Bank, etc. are set to pursue their millennialist market cargo cult in the years to come. While Wallach and Sforza clearly spell out the danger to democracy, justice and sustainability from corporate globalisation, the authors of "Free Trade in the New Millennium" confirm their anti-democratic agenda time and again in a multitude of ways.

Some of the usual local suspects are there: National’s Trade Minister, Dr. Lockwood Smith; economist, Sir Frank Holmes; academic, Professor Gary Hawke; Mad Mike; and former Council of Trade Unions head, Dr.(!) Ken Douglas. Along with them were some of their principal overseas collaborators: Dr. Patrick Lane, of The Economist; Dr. Lorenz Schomerus, State Secretary, German Economic Ministry; Joanna Hewitt, an Australian senior Asia Pacific Economic Cooperation (APEC) official; Clayton Yeutter, former US Secretary of Agriculture; and Professor Jagdish Bhagwati, Professor of Economics and of Political Science, Columbia University. Several of the overseas contributors stand out for their roles to date - in particular, Yeutter, a major American strategist and a former US Secretary of Agriculture and US Trade Representative; and Bhagwati, a very influential adviser to both the General Agreement on Tariffs and Trade (GATT) and its successor, the WTO, and theoretician of free trade.

Free Trade For Ever!?

Lockwood Smith and Frank Holmes both have brief gung-ho forewords and then the tone is firmly set by Gary Hawke in his longer Introduction. Professor Hawke, who has, until lately, been the director of the Rightwing NZ Institute of Policy Studies, based at Wellington’s Victoria University, presents an eminently vacuous review of the prospects for free trade. However, his article is still the most substantial piece in the book and so warrants the closest examination. So much for all the speakers at the seminar! Hawke blithely signals his optimism in his opening paragraph: "Of course there will be free trade in the new millennium. The organisers of the symposium from which this volume was derived were quite right to resist those who would have added a question mark to the title" (p.9). Certainly, the seminar itself was a mutualistic conference of the converted witnessing their adherence to orthodox conformity. Given the disarray of free trade forces following the riots at the WTO’s Seattle conference, Professor Hawke's confidence in the future may seem a little premature!

Hawke's arrogance and blindness then are such that any critics or even doubters are dismissed out of hand and it is a measure of the orchestrated conservatism of MFAT and the NZ Institute of International Affairs (NZIIA) that open discussion on free trade was once more heavily stifled at this official forum. As well as perverting the perception of existing realities, totalitarian commercialism would stifle dissent as much as possible. Such has been the sad state of democracy and free academic inquiry in NZ although there are signs of at least token change, i.e. the Labour/Alliance government does now at least publicly recognise that its critics constitute a problem needing attention (with regard to the NZIIA, an exception must be appreciatively noted here, in that its Christchurch branch has been open to alternative views about free trade on several occasions). Of course, the free trade brigade in NZ is still strenuously trying to marginalise its critics whatever the rhetoric might be. At the same time, despite the official commitment to free trade, there has been a marked lack of any lengthy material from the Establishment position arguing the case for it. Hence it is very important to seriously critique a document like these seminar proceedings, the more especially so given the intellectual arrogance of some of the presenters.

In his Foreword, Dr. Lockwood Smith has actually the gall to claim the seminar as part of the then National "Government's active programme of communication and consultation with New Zealanders on the new WTO Round" (p.5). This one way form of communication was neatly expressed in his next statement that: "It is important that we communicate the benefits of free trade to all New Zealanders". Lockwood Smith had arranged for the seminar to be held in the Legislative Council Chamber in Parliament House, Wellington, and, fittingly enough, "he opened it himself" (p.7).

The sort of assumptions expressed by Hawke in his Introduction pervade the current system: the progress of capitalism will sweep gloriously and endlessly onwards and upwards, disciplining everything which stands in its path. It will conquer the world for the good of us all! The economic fundamentalism displayed is both deeply seated and narrowly blinkered in its viewpoint. As Indian scientist/activist Vandana Shiva stressed in her 2000 Reith Lecture, there is a very real conflict between two polarised visions of the world: the vision of those who are pro-corporate globalisation and who would reduce life to monocultural commercialism, as contrasted with the vision of those who want a future based on ecological diversity and participatory democracy.

Hawke's projection of economic history into the future is simply more of the same capitalist trends typified by his smug assertion that: "The intellectual battle for free trade has long been won" (p.10). Oh dear, future history could come to bite economic historians of Hawke's stamp. His statement is also amusing in light of the fact that the National government saw a real need to sell "the benefits of free trade to all New Zealanders" - hence this particular seminar and publication of its musings. The ignorant peasants have yet to be convinced of the ancient intellectual victory! Professor Hawke, indeed, actually laments the fact that the world is not "peopled by economists" because then we would all clearly see the wonderful future to be achieved by free trade (p.18). Obviously Hawke takes his profession much too seriously - surely he has heard the joke about the existence of economists as being necessary to make weather forecasters look good!? His comments can at least serve as yet another example of overweening elitist intellectual arrogance and blindness.

Rocks In Our Heads

The current Agriculture Minister, Jim Sutton, has distinguished himself by saying that critics of free trade have rocks in their heads (National Business Review, 24/3/00). Rock Head, despite his Mad Mike style abuse of free trade critics, does similarly, if contemptuously, acknowledge that many New Zealanders see globalisation as the enemy (Press, 8/6/00). In fact, Sutton feels that "the Government and business had to take some of the blame for that ignorance". In July 2000, Rock Head was lamenting the fact that the US had decided to increase its dairy export subsidies, and so was pondering the mysteries of power politics. Obviously, educating Rock Head Jim is a daunting task but we will doggedly persist in pointing out his misunderstandings, errors and confusions. At the same time, we very definitely assign both the Government and Big Business lots of blame.

The basis for Hawke's confidence in terms of the theory of free trade rests on the principle that: "World income is maximised when there are as few constraints as possible on the allocation of resources to their most productive use. National boundaries are constraints on the allocation of resources and therefore world income is maximised by minimising the effect of national boundaries" (p.10).

What might first be noted here is the explicit recognition that free trade (and investment) means the erosion of national boundaries. Since democracy has evolved in terms of the nation state, free trade is thus a cynically calculated assault on democracy. If democracy were to be constructively decentralised then things might well be different but globalisation means exploitative rule from the remote power centres of transnational corporations (TNCs), the WTO, the World Bank, the International Monetary Fund (IMF), etc. It means the creation of a bloated, international, ruling elite wielding power through global organisations and accountable to no-one except to themselves while grossly enriching themselves in the process at the expense of the rest of us. In recent years, calling them to account is precisely what the 1999/2000 protests at Seattle, Washington, Geneva, Davos, Chiang Mai and elsewhere have been all about.

Under the new regime of corporate globalisation there is a widespread movement among Western politicians, academics, government officials and their battalions of media spin doctors to try and redefine the meaning of democracy, or somehow elide it altogether. As has been previously emphasised in these columns, it all adds up to an illustration in action of the Marxist thesis that the economic structure - and major changes in this structure - shape, and, in fact, more or less determine a "superstructure" of culture, and consequently the prevailing societal values and ideas. In fact, this is not just a Marxist thesis, e.g. the prominent and persuasive "cultural materialism" school of anthropology also lays claim to it (see "Culture, People, Nature: An Introduction to General Anthropology" by Marvin Harris, 6th ed., Harper Collins, 1993, as well as his "Cultural Materialism: The Struggle for a Science of Culture", Random House, 1979).

When capitalism was pitted against communism we were told that the former was the essential guarantor of freedom, of democracy. But, now, in the new era, capitalism in its guise of the free market is being even quite openly detached at times by pundits from any traditional democratic pretence at all. In a debate with the Alliance leader, Jim Anderton, on Radio Pacific (8/5/98), economist Stuart Marshall, of foreign-controlled Bancorp, once argued that these days there is accountability all the time - through investors in the market rather than once every three years at election time. This should be the stuff of real political satire but we will not see much of the Fourth Estate, the self-proclaimed watchdog of freedom, defending democracy in the new order, only pushing propaganda or uncritically parrotting the corporate line (with the odd token gesture to dissenting views). The unfettered rule of the market would eventually mean the death of democracy and the ultimate delegation of all decisionmaking to the global play of market forces. But, in turn, this "born again" capitalism is engendering a whole new opposition and conflicts on an unprecedented scale.

"Free Trade in the New Millennium" fits in well with the usual Establishment propaganda (the sort that TV1 and Holmes specialise in). Its stage managed presentations are pitched for public relations spin doctoring and corporate imagemaking. Neo-capitalist enthusiasm reigns, from Clayton Yeutter's rhapsody about how "between information technology and biotechnology, we are going to revolutionise the world of agriculture" (p.77), to Professor Bhagwati's congratulations that: "New Zealand is unusual; you have great faith in the core argument for free trade" (p.82). We should be very aware that this sort of stuff represents not just the line of the previous Government but the present one too: all power to the market and we will tag along for the ride wherever it might take us - the ultimate abdication of human freedom.

Current garbage about the the so-called "Third Way" being embraced by the Labour-led Government - an apparent alternative path to both capitalism and state socialism/communism - really relies on giving Big Business a free rein while still trying to fulfil some social objectives. In reality, the market is primary. For Prime Minister Helen Clark's Government the Third Way is about a market economy but not a market society. Hence the contradictions that such governments get caught in. By all means let us believe in a broadly third way, or ways - including radical alternatives that really address the future - but not the current sham version a la British Labour's Tony Blair and his sociologist guru, Anthony Giddens. The same sort of garbage is now being recycled, post-Seattle, by the industrialised countries' Organisation for Economic Co-operation and Development (OECD), the World Bank, etc., in a new public relations campaign to soft sell globalisation (Press, 5/7/00).

Fighting For Survival

After the implications for democracy, the next point to remark with regard to Professor Hawke's contention about free trade is its complete lack of specificity on "the allocation of resources to their most productive use". This is so characteristic of the extreme vagueness of capitalist economic theory here. It goes something like this: markets work best when there is the least governmental interference possible, since profit seeking behaviour is free to seek its highest returns from the utilisation of resources under the conditions imposed by competitive efficiency. This will maximise world economic growth into the interminable future. Free trade theory thus merges with more general free market theory which is central to the neo-capitalist game. The theory is completely open to embarrassing questions as to how equitably the resulting benefits will be spread; the capacity of the environment to sustain growth; structural problems relating to the historical legacy and current practice of colonial and neo-colonial relations between countries; the realities of monopoly/oligopoly power; military and covert intelligence control, etc., etc.

In this view then, "the allocation of resources to their most productive use" can comfortably tally with the fact that:"The world's 225 richest individuals, of whom 60 are Americans with total assets of $US311 billion, have a combined wealth of over $US1 trillion - equal to the annual income of the poorest 47% of the entire world's population" (The Big Picture, no. 17, May 1999, p.3). In the last four years of the past millennium (1996-9), the number of people living in abject poverty worldwide increased by 200 million while in those same four years the world's 200 richest people doubled their wealth (The World Economy Project, Preamble Center, Washington, www.preamble.org).

From a somewhat longer perspective, in the US, "86% of the much reported stock market gains of the last decade were harvested by the richest 10% of Americans" while Bill Gates alone has more money than the poorest 45% of Americans (cited by famed American environmentalist David Brower, in the "Seattle & Beyond" issue of Alliance for Sustainable Jobs and the Environment {ASJE}, vol.2, no.1, 2000, CA, p.3; www.asje.org). In international terms, the wealth of Gates and the next two richest men in the US "exceed the gross domestic product of the world's poorest 41 countries, with their 550 million citizens", even as high tech innovations led by information technology further widen poverty differentials around the globe. Remember that the WTO was inaugurated in 1995 with the conclusion in the previous year of the GATT Uruguay Round. For the free traders/marketeers all this increasing inequity means progress. Former National government Finance Minister, Bill Birch, mandated by the Labour/Alliance Government to facilitate free trade, has been quite unashamed about whose interests he really represents: in dismissing concern about growing income disparities. He is on record as saying, " . . . they will widen much more. That doesn't worry me" (NZ Herald, 16/3/95). And Prime Minister Helen Clark claims to be closing the gaps!

Productive use and efficiency in strictly "economic" terms can thus guarantee obscene affluence for a few by "ripping off" the majority of the world's population. Existing power relationships are simply ignored or rationalised away so far as the actual benefits to multitudes of people are concerned. About half of the global population survives on the equivalent or less of a few dollars per capita a day, as Western policies continue to create even greater gaps both between and within countries. It is highly significant that, post-Seattle, the UN Secretary General, Kofi Annan, has added his condemnation of "globalisation" to that of the Third World. Annan has declared that "globalisation is failing in its promise to benefit millions of people - possibly most of the people on the planet" (Press, 27/6/00). Besides this, he observed that: "Even in the richest and most democratic countries people wonder if the leaders they elect have any real control over events" (ibid). How true.

Kofi Annan's statements were made at a UN gathering in Geneva to mark a similar so-called "Social Summit" held five years ago. "Since that 1995 session the number of people in absolute poverty - living on less than a dollar a day - has climbed about 200 million people to 1.2 billion, the UN estimates" (ibid). Protestors in Geneva "denounced the World Trade Organisation and an effigy of WTO Director General, Mike Moore, depicted him as a vampire". This particular item was buried in the Press on page 12. Imagine if the newspapers, television and other mainstream media started to regularly give this sort of rare reportage the headline or lead prominence it deserves! But then this would upset the Business Round Table and its agents…

Corporations Rule The Earth

Along with the dismissal of democracy and equity, free trade theory also ignores the question of sustainability. Environmental limits to growth are either denied or postponed indefinitely which amounts to the same thing. In the West, market-driven fashions in the shaping of ideas reflect the continual capacity of capitalism to repeatedly bury - at least temporarily - the perception of mounting ecological problems. Modern market economics supposedly starts from the problem of scarcity but shows no proper understanding of this because it disregards the problem's ecological roots. The international dot com. society is resonant with the idea of thriving on the exchange of information at the same time as national societies round the planet fall apart under the conflicts engendered by capitalist globalisation. If not always associated with environmental problems in a seemingly direct sense, these conflicts are so often grounded in struggles over resources and land.

In his brilliant book, "Fighting for Survival: Environmental Decline, Social Conflict and the New Age of Insecurity", Michael Renner has this to say on the impact of the New World Order: "Globalisation is proceeding very unevenly. Its economic aspects are highly beneficial for some countries, some companies, and some communities - those that are best able to take advantage of greater integration. By contrast, the vast majority of countries and their populations are relatively powerless to affect the central workings of the emerging global system and often highly vulnerable to it" (Worldwatch Environmental Alert Series, Worldwatch Institute, Earthscan, 1997, p.27). We have heard this observation now echoed by the UN Secretary General.

Of the 100 largest economies in the world today, 51 are not countries but TNCs (Preamble Center). Two thirds of global trade is conducted by the 500 largest TNCs (ASJE, vol.2, no.1, 2000, p.2). Moreover, about one third of global trade takes place between TNCs, while another third takes place within TNCs, i.e. between branches of the same TNC (see Wolfgang Rosenberg's review of the United Nations’ World Investment Report 1999, in this issue). For Professor Hawke, and the other contributors to "Free Trade", this evidently constitutes the essential freedom of the market at work, the level playing field in action. Yet the contradictions leap out. For Dr. Lorenz Schomerus: "Globalisation has become an irreversible reality, driven mainly by technology and by the action of the economic operators" (p.50) - surely a most strange conception of human freedom. For Schomerus, elitism is apparently as natural as breathing. His key arguments for globalisation hinge on the point that it promotes "excellence in every sector" and gives consumers "the best deal in terms of quality and choice of products" (pp.50, 51). Pity about those who live at the subsistence level.

Industrial countries with a minority (about 25%) of the world's population enjoy a grossly disproportionate consumption of resources, e.g. from 80% or more of aluminium, iron, steel and paper to 75% of the world's fish catch ("Fighting for Survival", p. 140). These figures only indicate broad divisions since globalisation is rapidly deepening the divisions within countries. In the late 1990s more than 30 million Americans could not afford a healthy diet ("World Hunger: Twelve Myths" by FM Lappe et al, Grove Press, 1998, p. 14). Maintenance and expansion of the American Empire enables its rulers to avoid the issue of redistribution within their own nation state. While Schomerus in his "Free Trade" speech also goes on about the need for special assistance for the Third World this is the same old crap which the West has been spouting for many years, even as its claws dig deeper into its victims. In July 2000, the big industrial countries reneged again on promises to significantly reduce the burden of Third World debt, a burden that takes the lives of millions of children.

Renner, in his "Fighting for Survival", stressed the especial vulnerability of commodity exporters to market forces and TNCs. Furthermore, international economic integration goes hand in hand with fragmentation as liberalisation disrupts social and community bonds in various regions and localities. In 1995, a very important study by the UN Research Institute for Social Development showed that structural adjustment programmes have been hugely detrimental with the World Bank/IMF-prescribed model of "a virtually unconditional embrace of international market forces" being the road to ruin (cited in "Fighting for Survival", pp.86 & 143). This particular UN publication, "States of Disarray: The Social Effects of Globalisation", pointed explicitly to the sorts of consequences that free marketeers either avoid talking about, or try to gloss over. In the course of his "Free Trade" chapter, Professor Hawke does actually recognise that for free traders: "The broad policy challenge is both to exploit the benefits of globalisation and to constrain the adverse consequences of local identity such as its promotion of ethnic violence" (pp.12,13). Hawke and co. are thus comprehensively caught in the contradictions of globalisation.

Two case studies analysed by Renner - the 1994 Zapatista uprising in Chiapas, Mexico, and the horrific Rwandan holocaust later that same year - illustrate how a combination of interacting stress factors that include land, population growth, ethnicity, environmental decline, injustice, and failed economic policies can give rise to seemingly sudden explosions of violence (see ch.6). In the Rwandan case, IMF-imposed restructuring and falling commodity prices (especially coffee and tea) were crucial. The Zapatista uprising was also deliberately timed to mark its opposition to the inauguration of the North America Free Trade Agreement (NAFTA), incorporating Mexico.

Globalisation Destabilises The Pacific:
A Speight Of Problems

Ethnic-based conflicts in Fiji, flaring up again in 2000, are bringing certain issues home to New Zealanders with even open threats of similar violence from some disaffected Maori and more warnings from people like the Race Relations Conciliator (Press, 30/5; 31/5; 2/6/00). The gaps in Aotearoa/NZ society are starting to gape very ominously. Meanwhile, in response to Prime Minister Helen Clarks's lament about the loss of interest by foreign investors in NZ, US President Bill Clinton has remarked that: "Really, the point Helen Clark is making is that, if a country only has a population of only three or four million people, how do you hold that society together under these kinds of globalising pressures" (Press, 5/6/00). Globalisation cuts many ways and, ironically for Clinton, size may very well eventually count against American unity too as the cracks deepen there. However, at present, NZ is on target to be another de facto mini-American state, in so far as it is not already, with the ultimate loss of any independent sense of national security; or merely end up as an irrelevant pawn. The ironies multiply as Helen Clark complains about the "Americanisation" of NZ politics in the fall of the former Minister of Maori Affairs, Labour MP Dover Samuels, at the hands of ACT's Mad Dog Prebble. Politicians most assuredly reap what they sow.

In Fiji, coup leader George Speight represents the warping intrusion of international commercialised interests with Fiji's mahogany reserves being of special significance (see e.g. reports in the Press, 20/5; 22/5; 24/5; 29/5; 3/6/00). Prior to the May 2000 coup, the Chaudhry government had sacked Speight as chairperson of the Fiji Hardwood Corporation and awarded a crucial logging contract to a British company rather than the American Timber Resource Management (TRM) company with which Speight has been associated (including payments from the TRM chairperson to his Brisbane bank account). "Speight had been a critical player in the battle for the mahogany plantations, which pitted US and British interests against each other in Fiji, embroiling the US Embassy, the British High Commission, indigenous Fijian landowners, and some powerful local businessmen (ibid, 3/6/00). TRM has "included a group of New Zealand players" (ibid).

At the time of his racist coup, Speight, who has also been linked to corrupt activities in his past business dealings in Australia, was facing extortion charges in a Suva court (ibid, 22/5/00). Members of a particular set of the local Fijian elite linked with predatory, globalising forces are seeking greater power and wealth for themselves by playing the race/nationalist card. The fate of the mahogany plantations is only part of the stakes at issue. Political economy perspectives of this kind are virtually bowdlerised from the purview of "Free Trade". Ken Douglas, who has been an active collaborator on free trade, appeals for action on things like the dramatic increase of "child labour exploitation" and abuse of union rights but ends up with a hearty endorsement of his mate Mad Mike's qualifications to be the WTO Director General (pp.68,69). This theme of Mike's fitness for the position is touted by various other participants - from Lockwood Smith to Clayton Yeutter. We are very happy to concur with their judgement on this - one of the few things we would agree with these free traders about. Our endorsement of Mad Mike as a secret weapon unwittingly unleashed on the WTO continues to be warmly confirmed!

Whatever the specific complex of factors involved, similar conflicts to that in Fiji are still simmering across the Pacific from the past, or have broken out in recent years, or seem likely to threaten future peace: in East Timor; the Solomon Islands; Papua New Guinea; West Papua/Irian Jaya; Samoa; Tahiti; New Caledonia/Kanaky; Vanuatu; and Tonga (Press, 9/6/00). In the Asia/Pacific region more generally - in Indonesia, IrianJaya, Papua New Guinea, and various other countries - ethnic and regional conflicts abound. Widespread disintegrative processes are at work within the nation state as globalisation dissolves both ancient ties and more artificial, recent bonds; generates new nationalisms and alliances; reactivates old associations and old tensions; and generally disrupts communities across the region. Under globalisation instability threatens everywhere. Here in Aotearoa/NZ we have had the comical sight of Mad Dog Prebble shedding tears in Parliament over the Fijian coup (and his wife is from the Solomons; his ex-wife is Fijian), while he does his best to damage Maori-Pakeha relations.

Again in Aotearoa/NZ, even the Ministry of Social Policy has warned of "social chaos" as well as economic stagnation "if the gap between rich and poor continues to grow" with the lower 70% of the country's population "worse off than 10 years ago" (Press, 31/12/99). Only the top 10% had actually gained in this period. Moreover, a study commissioned by Treasury, and carried out by economist and statistician Des O'Dea, has confirmed these findings and found that the increase in income inequality seems "more marked in New Zealand than in other countries such as Australia, Britain and the United States", with NZ now appearing "to have one of the highest levels of inequality in the OECD" (Press, 10/6/00). If Aotearoa/NZ cannot resolve its problems peaceably then there is certainly little hope for the rest of the world. At the planetary level, there looms the very real threat of a global implosion from the corporate-driven "free-for-all" ("Fighting for Survival", p.149 & ch.10). These kinds of things are all inextricably linked with current economics but go far beyond the purview, concern or understanding of the contributors to "Free Trade". This is why their myopia is so very dangerous.

Arguing Free Trade

In his chapter in "Free Trade", Gary Hawke reviews the contribution of each speaker at the July 1999 seminar and any relevant points from this review are dealt with below. However, before doing so Hawke elaborates some further arguments in favour of the case for free trade which we should look at. Hawke is so far behind the ball game that he actually rests his case on the discredited argument "in terms of comparative advantage and the gains from specialisation" (p.10). Rock Head Jim Sutton took up this refrain in mid 2000 when he avowed the "fewer trade barriers the better" in lamenting that "many New Zealanders saw globalisation as the enemy" (Press, 8/6/00 - see also above).

The traditional argument from comparative advantage relies on the advantages claimed to be gained by countries complementing one another in their trade - by each producing the goods that it can best specialise at doing. In this way goods are effectively exchanged and growth promoted. "In the neoclassical paradigm, free trade is a totem and tariffs are taboo. But such reasoning is ahistorical. It denies the major role played by tariffs in promoting the initial industrial growth of the most successful of the market economies, neglects the fact that such economies are now pursuing liberalisation from positions of dominance in the global economy, and discounts the need for weaker, less developed countries to employ tariffs to protect infant and adolescent industries. Conventional tariff theory is also stuck in the paradigm of international trade between different companies in different countries, when global trade is today dominated by multinational companies investing and producing worldwide" ("The Global Economy: From Meso to Macroeconomics" by Stuart Holland, Weidenfeld & Nicolson, 1987, p.167). These criticisms are even more apposite in these times when TNC power has so greatly increased.

Whereas Hawke recognises the infant industry argument, he appeals once more to the principle of comparative advantage which, however, as indicated in the previous paragraph, has been subverted by the rise of the TNC, by the mobility of capital, let alone other considerations. Conventional trade theory has indeed supplemented or surpassed the idea of comparative advantage (relying on "inherited endowments of factors of production", e.g. mineral resources or pasture land) with that of so-called "competitive advantage" in key export industries (see especially the influential so-called "Porter Report", i.e. "Upgrading New Zealand's Competitive Advantage" by G. Crocombe et al., Oxford University Press, 1991). It is certainly evident that the most thriving trade takes place within the industrialised bloc, often between countries which trade in much the same sort of goods rather than exchanging goods in which each specialises according to a supposed comparative advantage. In this regard, traditional trade theory, as analysts like TNC guru Peter Drucker have contended, has been turned on its head! However, neo-capitalist trade theory a la the "Porter Report" extensively confuses and confounds TNC competitive advantage with country competitive advantage.

We have emphasised the concentration of control over trade by TNCs which makes a real joke of the idea of "free trade". Free market theory, in the purest sense, depends on many equally matched sellers and buyers in the competitive interaction of demand and supply. It was thus enlightening to see Fletcher Challenge chairperson (and former chief executive officer of monopolistic Telecom), Dr. Rod Deane, one of NZ's most ardent free marketeers and a huge beneficiary of deregulation, happily defend in July 2000 the sale of Fletcher Challenge Paper to Norwegian TNC, Norske Skogindustrier ASA, in the very specific terms of international market concentration. After explaining that globalisation is not just a concept, Deane said that consolidation was happening and had reached a new maturity. "In the first quarter of this year alone, he said, five major industry transactions had been announced with a combined value of $US22 billion. There was now a smaller number of larger players in the sector" (Press, 5/7/00). Free market ideology certainly thrives on self-serving contradictions, or we might say, hypocrisy. Deane, who has often been accused of greed, was attacked by a minority shareholder activist (labelled an "agitator" by the business reporter) as a "grossly over-paid puppet" and one of the "traitors to the economy of NZ" for selling off another vital asset (ibid). Hear, hear.

Professor Hawke, however, is obsessed with the notion of maximising income by freeing up the governmental barriers to trade. While he grants that at a couple of points in the past both Britain ("in the middle of the 19th Century") and the US ("in the late 1940s") could have gained more through having had "exploited" a position of power, he maintains in general even the most powerful countries gain more through so-called free trade (p.11). Yet the American Empire by certain key statistics has never been wealthier, more powerful… and still maintains a whole armoury of trade protection (including blatantly WTO-illegal trade sanctions). It manipulates the notion of free trade according to the wishes of its strongest interest groups. Whereas some theorists are frank enough to admit there are always winners and losers in free trade, Hawke persists in being in resolutely upbeat about it all. However, as one of the US's most eminent economists, Professor Robert Heilbroner, puts it: "globalisation" or "internationalisation"… "poses the question of how the market will take care of the increasing number of Americans or Mexicans or citizens of any country who find themselves separated from employment because of greater market penetration across their borders. Thus, the growing presence of globalisation raises the prospect of a world in which international economic forces - quite as impersonal as 'things' - are in the saddle and will ride mankind" ("Visions of the Future: The Distant Past, Yesterday, Today, and Tomorrow", Oxford University Press, 1995, p.86).

In pursuing his own line of argument, Hawke goes on to deal, in equally brief terms, with as he sees it counter-arguments to the basic argument about maximising income. He sees "two major possibilities" - "national objectives other than maximising income" (p.11); and objectives which are less national "and more the particular concern of an interest group" (p.12). With regard to the first possibility, Hawke contends that there are already complex and pervasive "non-income objectives". Transparency is needed for any meaningful discussion of such objectives. This sounds reasonable with regard to transparency but, of course, free trade/investment is fast eroding and displacing non-income objectives, and this lies so much at the core of the central problem of globalisation.

Hawke then moves on to the second counter-argument and says that: "We therefore eventually reach the familiar proposition that the intellectual argument for free trade is opposed by the political influences of special interest groups" (p.12). As an example, he cites "a group which values production of a particular commodity (or preservation of a particular kind of employment), irrespective of the impact on aggregate national income". This is the familiar point about political pressures" (p.12). For Hawke, all this amounts to "identifying deeper issues that provide fertile ground for disguising particular interests as the public interest" (p.12). Well, yes, you have surely put your finger on it there, Professor - the free trade brigade is very definitely a special interest group operating under the cover of the supposed common good.

Let us also take warning from Hawke's conviction "that the issue about free trade is one of communication rather than of substance" (p.13). Free traders are frantically working on how to improve the communication of their message and so undermine resistance to neo-capitalism. On the other hand, we can take heart from Hawke's concurrent conviction that the good news spin on the free trade message is so problematic - "it is the substance of the argument that makes communication so difficult" (p.13). Long may this last!

Walden Bello KO’s The Lightweights

As already intimated, most of the actual seminar speeches reproduced in "Free Trade" are pretty lightweight stuff. They were pitched at the time in support of Mad Mike and his agenda for the WTO. They usually consist of a wish list of things to be done in aid of the great corporate cause by means of a new WTO Round. In fact, there was only one technical type, economic argument of any moment: Professor Bhagwati criticised the "Stolper-Samuelson theorem" which asserts that, given certain conditions, workers' real wages would be reduced under the operation of free trade (p.82). According to the Stolper-Samuelson theorem, "if the price of imported labour-intensive goods falls in world trade, then ceteris paribus [‘other things being equal’. Ed.], the real wages of labour will fall too…" (p.82). In rebuttal to this, Bhagwati maintains that "the relative prices of labour-intensive goods in the 1980s actually rose" and that this can be explained by some poor nations becoming rich and then becoming net importers of "labour-intensive goods from countries poorer than themselves". His examples relate to the role of the Asian Newly Industrialising Countries (NICs), i.e. Taiwan, South Korea, Singapore and Hong Kong in first supplying Japan with "labour-extensive exports", and then moving out of these exports as China became the regional specialist in the production of such goods.

In countering this kind of positive spin on free trade, Walden Bello, an expert on the Asia-Pacific region and a highly perceptive analyst, makes the following observation: "A close look at the rise and fall of the South-East Asian 'tigers' reveals the central role of a development process sustained not principally by domestic savings and investment but by huge infusions of foreign capital. In the late 1980s, the region's growth was heavily dependent on Japanese direct investment" ("The Asian Economic Implosion: Causes, Dynamics, Prospects" by Walden Bello in Race & Class, 40, 2/3, 1998/9, special issue on "The Threat of Globalism", pp.133-143 & quote on p.135). Then in the late 1990s things came unstuck. We should take close note in this country.

As Bello indicates, "there was a basic contradiction between encouraging foreign capital inflows and keeping an exchange rate that would make a country's exports competitive in world markets" (ibid, p.135). As well, "the bulk of funds coming in consisted of speculative capital seeking high and quick returns" (ibid). Hence the implosion when a crisis point developed. Bhagwati's example of supposedly positive free trade growth is limited and short term in scope, misleading in interpretation, and deeply flawed in practice - not least in being dependent on the rape of the regional environment. A complicating aspect is that the NICs have been driven by much governmental planning and protection along with foreign (especially US) aid and have hardly been exemplary models of free enterprise although the free traders have long drawn inspiration from them. Bello, significantly enough, predicted back in 1990 a deepening crisis for the NICs when he warned that "the NICs' successful export-led growth cannot be understood without taking into consideration a unique concatenation of external factors" ("Brave New Third World: Strategies for Survival in the Global Economy", Earthscan, 1989, p.34); and warned that "the NICs were losing their comparative advantage in cheap labour" (p.36), and that this might cost them dear (p.40). The touted recovery of the region is only a temporary cover for a host of deepseated problems.

Interestingly, both Bhagwati and Bello can agree that the US has done very well for itself out of all this, at least in immediate terms. For Bhagwati the US has gained in two ways: through "those consumer goods imports which are labour-intensive and where prices have fallen - textiles, shoes, and so on" - that are now "hardly produced in the US any more in any significant way" ("Free Trade", pp.82, 83); and in the local production of labour-intensive goods for which "relative prices have actually gone up" (p.83). For Bello, on the other hand, Washington has "seized the opportunity to use the IMF to advance its bilateral agenda for the region - that is, to batter down the tariff and investment barriers to US exports and capital" (Race & Class, p.137).

In NZ's case, the ballooning current account deficit underlines the structural economic conundrum in which the country is entrapped because of Rogernomics and unregulated markets. Our foremost economist critic of liberalisation, Wolfgang Rosenberg, has neatly summed up the bankruptcy of prevailing ideology in remarking that the major deficit component of the 1999 deficit was $7.3 billion service payments on foreign investment out of a total deficit of $8.2 billion. Thus the big economic problem for NZ is "not, essentially, over-importing but excessive foreign investment" (Press, letter to the editor, 6/4/00). In truth, as Wolfgang also points out, the latest UN figures show NZ to be "the most foreign-invested of all 'developed' countries" (see also Wolfgang's books: "The Magic Square: What Every New Zealander Should Know About Rogernomics and the Alternatives", NZ Monthly Review Society, 1986, & "New Zealand can be Different and Better: Why Deregulation does not Work", 1993).

Meantime, however, the corporate economists and media commentators keep assiduously obscuring this awkward truth and concealing its implications from the public. The tactic is to blame the current account deficit on over-spending and lack of saving (e.g. Press, 12/7/00; for a rebuttal, refer to Bill Rosenberg's article in Watchdog 88, September 1998). Lately, in reaction to an obviously orchestrated campaign by Big Business against some Government policies, the Labour/Alliance leadership has been grovelling for more foreign investment. Incidentally, a recent insight into the Murdoch news empire was nicely provided by an interview with INL’s (i.e. so-called Independent Newspapers Ltd) managing director, Mike Robson, where he waxed highly scathing of "negative statements by politicians about foreign investment in New Zealand", denouncing as "nonsense that foreign owners suck all the money out overseas" (Press, 19/6/00). It is good to see the TNC-controlled "free press" so nakedly revealing its biases!

Beyond Free Trade

So far as the future goes with regard to international trade negotiations, Professor Hawke records how there is "pressure to widen the agenda still further. The key issues are trade and labour standards, and trade and the environment" (p.16). In his opinion, Jagdish Bhagwati "provides a compelling argument" for dealing with these issues but not within the WTO. Moreover, Ken Douglas "generally agrees", advocating partnership on labour issues with the International Labour Organisation (ILO) (pp.17 & 69). Hawke, Bhagwati & co. want to keep the WTO focused on the free trade drive and uncontaminated with side issues.

Where, in fact, this free trade drive is heading, Hawke is quite clear: in reaffirming the arguments of Dr. Schomerus, Hawke happily points the way to a mounting free market assault on "national regulations and all that that implies, especially for politicians who still use old fashioned language and thinking about sovereignty" (p.17). Schomerus, indeed, says that: "It will be extremely interesting to see how parliaments and governments, sovereign governments, will react to that, in my view, inevitable trend" (p.50). So Hawke and Schomerus, while they are naturally very careful to avoid any reference here to democracy, openly and unambiguously endorse the anti-democratic agenda of the WTO and its associated agencies. Very clearly, too, any labour and environment concerns are to be relegated in practice to a much lower level of priority or simply disregarded as irritating obstacles. Once more, mind you, all this is in aid of "creating agreement that governments should remove barriers to the optimal allocation of the world's resources" (p.17). We have already shown what a ludicrous notion this is.

Dr. Schomerus blatantly pushed the line that "future trade negotiations will increasingly be about national regulations - national regulations having direct and indirect effects on trade" (p.49); and that "trade negotiations will increasingly develop into negotiations about harmonisation of national regulations" (p.50). Schomerus tees up for attack such things as "national or regional health policies, safety requirements, and environmental policies" (p.49); and, as well, "standards, public procurement and intellectual property" (p.50). A topical example of the undermining of safety requirements relates to the continuing American assault on the labelling of genetically modified foods. The US Ambassador to NZ has again warned against "unnecessary trade restrictions" (Press, 19/7/00). Another example concerns the possible imports of American chicken meat which the Ministry of Agriculture and Forestry (MAF) is canvassing. One objector has alleged that: "The US is notorious for 'dumping' very low-grade chicken meat products onto any country willing to take them (the Caribbean Islands, etc.)" (Christchurch Star, 7/7/00). Such imports would mean the ingestion of harmful "medical pharmaceuticals" and could introduce new diseases here.

Watch Out, The Neanderthals Are Coming To Get You

The global reach of the TNC is into the heart of sovereignty, democracy, sustainability, welfare, human rights, and national security. Within this context, we have the comedy of Mad Mike still raving on about how the WTO, the World Bank, etc. actually advance "the independence and sovereignty of the nation state" (p.37). In fact, he embraces the contradiction superbly: globalisation and its "international architecture" are: "Far from a threat to the nation state, the opposite is the truth" (p.37). No wonder Yeutter backed Moore's bid to be WTO Director General "from the very first day" (p.71) - Mad Mike is certainly the great communicator with the masses that his corporate backers want. The only trouble is that he seems to have stuffed up badly!

The real corporate aim is to transform the world along the lines of the notorious free trade zones that have been common in Asia, along the US-Mexican border (the maquiladoras), and elsewhere. This type of attitude is repeatedly demonstrated in "Free Trade". Professor Bhagwati, for instance, considers that the well rubbished "first GATT report on trade and environment", produced in 1991, established that trade and globalisation must be good for the environment (p.83). In actual fact, the report served as one of the critical triggers to stir up the international environment movement against the free trade agenda! (e.g. see chapter 7 on 'The GATT and the Environment' by James Cameron in "Greening International Law", ed. P.Sands, Earthscan, 1993). As a rider, we should take notice that in the real world of political economics the US, in particular, has been willing to use labour, environment and human rights concerns even within the WTO for its own protectionist purposes.

Professor Hawke wants to go further than mere reciprocity in trading concessions - he wants the "unilateral removal of barriers rather than reciprocity" - and turns to "institutions other than the WTO" to foster such an approach, especially the Asia Pacific Economic Co-operation (APEC) community/conference process (pp.17,18). "APEC is about unilateral liberalisation, with the collective element providing reassurance rather than drive" (p.19). He lays it on the line: "Seeing tariffs, trade facilitation, economic and technical cooperation, financial issues, and social issues as discrete boxes is outdated" (p.20). Everything is trade-related and so subject to the capitalist imperative and, in particular, "unilateral liberalisation". But Hawke worries about the implementation. In this regard, we can turn to the informed observations of Tim Groser, a former chief free trade negotiator of the NZ Government and now executive director of the Asia Foundation of NZ. When addressing the NZ Institute of Policy Studies, Hawke's former outfit, Groser acknowledged that unilateral liberalisation had gone down the plughole - "the era of unilateral liberalisation is over. Reciprocity is now the name of the NZ trade policy game" ("Beyond Closer Economic Relations: New Trade Options for NZ", 15/3/00, p.7). How this actually works out is another issue.

Throughout the seminar papers, even on the eve as the speakers then saw it of the start of a new WTO Round, there runs the gnawing thread of concern about the growing movement against free trade/investment. Professor Bhagwati echoes Mad Mike in his dismissal of "a few Neanderthals" who oppose the "theoretical case for free trade" as put forward by the eighteenth century economist Adam Smith with his conceptualisation of "comparative advantage and specialisation" (p.79). On the other hand, Bhagwati later contradicts himself with his claim that "worries about free trade are strongest in rich countries"; and expresses concern too about fears "that globalisation is causing disintegration… it is alleged to be hurting social agendas" (p.81). Yet ironically, some of his mates, as we have already seen, are quite unashamedly directing the free trade attack at social concerns and at democracy itself. Clayton Yeutter, in turn, worries about people's fears about biotechnology and suggests that "we have to deal with that fright in a skilful and effective way" (p.76). We ought to heed Yeutter's remark that there are "plenty of ways to do that" - look out for plenty of new corporate propaganda and manipulations. After all, the tobacco companies and others have set out a lot of models to follow (Yeutter, by the way, travels about "doing lots of speeches to agricultural alliances around the world" and sits on the board of Texas Instruments, among other things, p. 77).

Funnily enough, it was Mad Mike who was most prophetic at the seminar in July 1999. He declared to his audience: "We must make our case, otherwise the WTO will continue to meet, and Ministers assemble, behind barricades, ringed by the police" (p.39). And the battle of Seattle was yet to happen! Since Seattle, Moore's term of office at the WTO has been one of desperate damage control as he contests the forces he has helped unleash. And back in July 1999, as well, he was already lamenting the fact that the words "Free Trade" had become "negatives in many nations" (p.39); and that in his own country there is an increasing number of people who believe "that globalisation is the cause of all their problems" (p.38). Nevertheless, in typically Orwellian fashion, Moore makes his case in the name of "freedom and democracy" and calls for "the rule of law" (p.39) - i.e. for the rich and powerful to write the rules. Since the late 1980s NZ governments have been obsessed with getting "a strong international rules-based system" to supposedly safeguard countries like our own "which have small economies and global trading interests" ("Inquiry into 'New Zealand's Place in the World' and 'New Zealand's Role in Asia-Pacific Regional Security': Report of the Foreign Affairs, Defence and Trade Committee", NZ House of Representatives, 1997, p. 9). The great and supreme irony is that everything of national value, including our security, is to be sacrificed on the free trade/investment altar.

Rolling Them Back!

The anti-free trade movement needs to build on the current disarray in the momentum for globalisation. Opposition has so far stymied the efforts of the Clinton Administration to get "fast track" authority for free trade negotiations/agreements in the US which would have circumvented the democratic process of debate and proper scrutiny. The expansion of NAFTA has also been stopped. Moreover, the conspiratorial Multilateral Agreement on Investment (MAI) was successfully opposed and the launch of a new WTO Round has failed to fire.

The plotting still goes on of course. Tim Groser has actually described the current bid for a free trade deal between Singapore and NZ as a "Trojan Horse for the real negotiating end-game: a possible new trade bloc encompassing all of South East Asia and Australia and NZ" ("Beyond Closer Economic Relations: New Trade Options for NZ", 15/3/00, p.1). A related option, recently revived, is an agreement spanning Australia, Chile, NZ, Singapore and the US, the so-called P5 agreement, P standing for Pacific (Press, 10/7/00). According to a WTO official: "The WTO is the place where governments collude in private against their domestic pressure groups" (Preamble Center - quoted in its users' guide for the video, "Global Village or Global Pillage". See our review of it elsewhere in this issue. Ed.). We must never forget the same thing holds for regional free trade agreements. Among other happenings, the NZ Institute of Policy Studies is promoting monetary union with Australia - an ANZAC dollar (also the subject of an article in this issue. Ed.) - and this would mean the end of any independence, any freedom we would have to decide our own economic destiny.

Overall, nevertheless, opposition movements uniting the efforts of Western NGOs with Third World peoples and governments have achieved a huge amount to date in checking the so-called "irreversible reality" ("Free Trade", p.50) of the corporate global takeover. The Aotearoa/NZ movement has contributed to this and we can draw lots of inspiration from both local and international successes. In the years to come, we must be more determined than ever against those who would destroy our democracies, human rights, environment, and hope for a sustainable future. Their real agenda needs constant exposure and criticism. MFAT's "Free Trade" serves us admirably in this respect.

Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. December 1999.

Email cafca@chch.planet.org.nz

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